Banks to continue cooperation with internet-based platforms
January 26, 2021 Category China News Round-up, Weekly
The China Banking and Insurance Regulatory Commission (CBIRC) announced it will encourage banking and insurance institutions to cooperate with internet-based platforms, including those companies that have been summoned for meetings with financial regulators. “Financial policies supporting internet companies will remain unchanged, so will the strength of financial support,” said CBIRC Vice Chairman Liang Tao. He said that it is true that a few banks are reluctant to offer loans or have stopped offering loans to private companies specializing in internet-related fields, and such behavior ought to be corrected. Recently, financial regulators summoned top executives of some internet companies such as Ant Group for meetings. While confirming that these companies have played innovative roles in developing financial technologies, improving the efficiency of financial services, and increasing access to financial services for individuals and businesses, regulators pointed out that the companies also created problems like breaking rules to capture profit opportunities created by different regulations, using monopolistic practices, and infringing on consumer rights and interests. To prevent disorderly expansion of capital, the regulators have taken measures to rectify such problems, the CBIRC said. The regulator added that regulatory measures are entirely consistent with the goal of supporting the long-term stable and sound development of private companies.
“Relevant measures are not against private enterprises or a specific company, and will not affect the normal business development of these companies,” Liang said. In 2020, bank loans to private companies increased by CNY5.7 trillion on a yearly basis. Loans to micro and small enterprises whose total credit lines are up to CNY10 million per borrower, rose 30.9% during the same period. Last year, the country also increased bank loans to the manufacturing sector by CNY2.2 trillion from 2019, amid efforts to continuously raise the quality and efficiency of financial institutions to serve the real economy. By the end of 2020, the non-performing loan (NPL) ratio of China’s banking sector dropped 0.06 percentage point from the beginning of the year to 1.92%, amid strengthened efforts to prevent and control financial risks in key areas. China’s disposal of non-performing assets hit a record high of CNY3.02 trillion last year, the China Daily reports.
However, under draft rules, the People’s Bank of China (PBOC) can advise the government’s antitrust committee to stop companies abusing their dominant position or even break up a non-bank institution, if it severely hinders the healthy development of the payment service market. So far China has 233 licensed players, with the market dominated by Alipay and WeChat Pay in terms of online transactions. The PBOC will hold talks with institutions over their market dominance once a single player’s market share reached a third of the total non-bank payment industry, or when the market share of two players combined reached half of the total. It will also identify institutions as having a monopoly once a single player holds more than half of the market share in the nationwide electronic payment market, which also includes online and mobile banking payments.
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